Bank Negara Malaysia, the central bank of Malaysia, has approved a commercial banking licence to a locally incorporated company to be established by India-based banks: Bank of Baroda (40%), Indian Overseas Bank (35%) and Andhra Bank (25%).
The licence is issued as a reinstatement of a commercial banking licence to an Indian bank, which was previously operated in Malaysia and was affected by the law that prohibited any commercial bank which was under the effective control of a foreign government to hold a banking licence in Malaysia.
The issuance of this licence is therefore not part of the new commercial banking licences that will be issued under the liberalisation initiative that was announced in April 2009. However, it has been part of an engagement between India and Malaysia since 2003.
The presence of the new Indian commercial bank is expected to further strengthen the economic and financial linkages between Malaysia and India. In addition, it is expected to contribute towards the overall development of a more diversified financial sector in Malaysia.